A country's standard of living depends on its ability to produce goods and services

Prices rise when the government prints too much money

Society faces a short-run trade-offs between inflation and unemployment

Thinking like an Economist

Think in terms of alternatives

Evaluate the cost of individual and social choices

Examine and understand how certain events and issues are related

Economic Models

The circular Flow Diagram

The circular-flow diagram is a visual model of the economy that shows how dollars flow through market among households and firms

Firms

Product and sell goods and services

Hire and use factors of production

Households

Buy and consume goods and services

Own and sell factors of productuin

The production Possibilities Frontier

The production possibilities frontier is a graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology